2026-04-18 22:03:10
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
⚡️ TSMC: Agentic Shift Acceleration
🔬 ASML: AI Demand Boosts Outlook
💊 J&J: Oncology Powers Guidance
👔 Morgan Stanley: Record Trading
🏛️ Goldman Sachs: Equities Hit Records
🥤 PepsiCo: Snack Volume Returns
🧬 Abbott: Strategic Reset
🏦 Schwab: Trading Records
📈 Blackrock: iShares Momentum
TSMC’s Q1 FY26 results reflected a massive transition, as demand for AI infrastructure moved from speculation to concrete financial gains. Revenue skyrocketed 41% Y/Y to $35.9 billion ($0.4 billion beat), while net income surged 58%. Management raised its full-year 2026 revenue growth forecast to above 30%, up from the previous ~30% target.
Gross margins expanded to a staggering 66%, far exceeding the analyst consensus of 64.5%. CEO C.C. Wei noted that the industry is moving beyond generative AI into agentic AI—where platforms perform actions rather than just answering queries—leading to a step-up in chip demand that shows no sign of cooling.
TSMC’s dominance is now almost entirely tied to its most advanced leading-edge technologies. Chips made with 7nm or smaller nodes accounted for 74% of total wafer revenue. The high-performance computing (HPC) segment, which houses the powerhouse AI chips for NVIDIA and AMD, now accounts for 61% of total revenue. That compares to just 41% four years ago.
While the 3nm ramp-up continues to accelerate (now 25% of revenue), management is keeping its foot on the gas. Capital expenditure is trending toward the top end of the $52–$56 billion range for 2026. This aggressive spending serves as a warning shot to rivals like Intel. C.C. Wei pointedly remarked that there are “no shortcuts” to foundry leadership, emphasizing that manufacturing excellence and customer trust cannot be bought overnight.
Despite the blowout numbers, shares dipped slightly as investors digested potential macro risks. CFO Wendell Huang acknowledged that the conflict in the Middle East could drive up costs for specialized chemicals and gases, such as helium. While it is “too early to quantify” the exact impact on profitability, management remains confident in their supply chain resiliency and energy stability in Taiwan.
TSMC is also doubling down on its global footprint, with total US investment pledges now reaching $165 billion. As the firm prepares for a sequential 10% revenue jump in Q2, the narrative is clear: TSMC is the indispensable foundation of the AI era, and for now, its fabs are running hot with no significant competition in sight through the end of the decade.
Check out the earnings call transcript on Fiscal.ai here.
ASML kicked off Q1 2026 with a solid beat, proving that the semiconductor industry’s lithography intensity is only increasing. Revenue rose 13% Y/Y to €8.8 billion (€110 million beat), while GAAP EPS of €7.15 comfortably topped estimates. Citing an insatiable appetite for AI infrastructure, management raised and narrowed its full-year 2026 sales guidance to €36-€40 billion (an improvement from €34-€39 billion previously).
The quarter’s bottom line was particularly robust, with a 53% gross margin that exceeded guidance. This was driven by a strong mix in the Installed Base business, where customers are paying for upgrades and services to squeeze more capacity out of existing tools while waiting for new systems to arrive.
The narrative remains dominated by demand for EUV (Extreme Ultraviolet). CEO Christophe Fouquet noted that customers are “sold out for 2026” and that ASML is racing to ensure it isn’t responsible for the bottleneck in global chip production. The firm expects to ship at least 60 Low NA EUV systems this year and has already mapped out a path to 80 units in 2027. Surprisingly, the older Immersion DUV business also showed resilience; previously expected to decline due to China trade tensions, demand has turned flattish as chipmakers potentially accelerate purchases ahead of new export curbs.
Geopolitics remains the primary overhang. China’s share of system sales dropped to 19% this quarter (down from 36% in Q4), aligning with management’s long-term target of 20%. While US lawmakers recently introduced the MATCH Act to further restrict equipment sales and servicing, management asserted that their new guidance range can “accommodate potential outcomes” of these export discussions. Despite the raised outlook, shares dipped 5% on the news as a slightly soft Q2 revenue guide of €8.4–€9.0 billion fell just shy of lofty analyst expectations for the bridge into the year’s second half.
2026-04-17 20:03:21
Welcome to the Free edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
Netflix walked away from the Warner Bros. Discovery merger in February, avoiding a bidding war with Paramount Skydance. Investors initially cheered the discipline, and the failed deal delivered a $2.8 billion breakup fee that boosted Q1 results.
That relief didn’t last. Shares fell nearly 9% after earnings, as investors looked past the windfall and focused on what comes next: a business that now has to justify its premium valuation through price hikes, ad-tier scaling, and internal efficiency.
Its unchanged 13% revenue growth outlook for 2026 implies slower momentum from here. Now that the M&A shortcut is gone, Netflix must prove it can build the next leg of growth on its own.
Today at a glance:
🍿 Netflix Q1 FY26
🎯 3 Strategic Priorities
📈 Streaming Market Share
🛰️ Amazon: Buying the Spectrum
Revenue +16% Y/Y to $12.2 billion ($80 million beat).
Operating margin 32% (+1pp Y/Y).
EPS $1.23 ($0.11 miss).
Termination fee of $2.8 billion included in ‘other income’ (see visual).
Cash and short-term investments: $12.3 billion.
Debt: $14.4 billion.
Revenue +12%-14% to ~$51.2 billion.
Operating margin 31.5% (+2pp Y/Y).
📈 Top-line momentum: Revenue rose 16% Y/Y and was slightly ahead of expectations. While Netflix no longer provides subscriber counts, management attributed the beat to slightly higher-than-planned membership growth. The growth was global, with Latin America (+19%) and Asia-Pacific (+20%) growing the fastest.
📢 Ads on track: The advertising segment remains a primary growth engine. Netflix reiterated its projection for ad sales to double to ~$3 billion in 2026. This trajectory is essential to the multi-tier strategy, serving as a safety net against churn as inflation pressures consumers to cut back on non-essentials.
📉 Cautious Q2 guidance: Management guided for an operating margin of 32.6%, a 150bp decline Y/Y. The softer outlook reflects front-loaded content amortization, with margin expansion expected to resume in the second half. Netflix has been a story of steady margin expansion if we zoom out.
🏷️ Price increase kicks in: In March, Netflix hiked the price of its standard ad-free plan by $2 to $20/month. Since this was announced late in Q1, the financial impact was not reflected in these results but is expected to be a primary driver of revenue growth in the coming quarters.
👔 End of an era: Co-founder Reed Hastings announced he will step down from the board in June after 29 years. His departure marks the final transition to the Ted-and-Greg era of leadership. Symbolically, it reinforces that Netflix is now being judged less as a visionary disruptor and more as a scaled media platform expected to deliver steady growth and disciplined returns.
Netflix is evolving into a diversified entertainment ecosystem. To compete with legacy media conglomerates and social apps like TikTok or YouTube, management is focusing on three fronts:
Content: Netflix is expanding beyond binge-worthy series to capture more “moments of truth.” Live events drove record sign-ups in Japan this quarter, while podcasts and games aim to make Netflix more of a regular destination rather than a weekend-only app.
Technology: Management is leaning on AI to improve efficiency and discovery. The acquisition of Ben Affleck’s AI startup, InterPositive, suggests Netflix wants to give filmmakers AI-powered production tools. On the consumer side, a vertical video discovery feed with TikTok-like browsing is coming later this month.
Monetization: Ads and pricing work together. The ad tier now drives 60% of new sign-ups, giving Netflix a lower-cost entry point, more room for targeted third-party bundling, and more flexibility to raise prices elsewhere.
Bottom line: Ads and pricing can support low double-digit growth, but investors may still want clearer evidence that Netflix’s rising content spend is generating the kind of returns that justify its premium multiple (well above 30x forward earnings).
According to Nielsen, streaming accounted for 48% of US TV time in February, up from 43.5% a year ago and at an all-time high. The growth came at the direct expense of cable, which fell to a 20% share, down from 23% a year ago.
Netflix captured 8.4% of US TV time in February, slightly up from 8.2% a year ago. This somewhat flattish engagement has become a regular topic on the earnings calls. But co-CEO Greg Peters often points to retention as a better metric than hours watched to evaluate Netflix’s ability to steadily raise prices.
Warner + Paramount (part of ‘Other’) remained small at 3.4% market share in February if we combined them (+0.9pp Y/Y).
Peacock was a big winner in February, with 3.0% market share (up 2X from a year ago), thanks to the trifecta of Super Bowl LX, the Milan Cortina Winter Olympics, and the NBA All-Star Weekend. But these are one-off major sports events, and the share boost is likely to be short-lived. This is textbook cable-stealing, and not at the expense of other streamers.
YouTube remains the streaming king, with a 12.7% share of US TV time, up from 11.6% a year ago, but still below its July 2025 peak.
Amazon has spent years—and billions—trying to catch up to SpaceX in the low Earth orbit (LEO) satellite race. While Elon Musk’s Starlink already has a massive head start with 10,000 satellites, Amazon Leo is shifting its strategy from raw scale to strategic integration. Following a major partnership to bring Wi-Fi to Delta Air Lines, Amazon is now moving from the cockpit to the pocket.
Amazon’s $11.6 billion acquisition of Globalstar is a definitive play for the signal in your smartphone. By swallowing the satellite operator, Amazon is buying a regulatory shortcut to challenge Starlink’s direct-to-device (D2D) dominance, with plans to launch its own consumer service by 2028.
The disparity in orbit remains massive: SpaceX has roughly 10,000 satellites to Amazon’s ~265 today.
However, Globalstar provides two things Amazon couldn’t get quickly:
Buying the spectrum: Access to radio frequency licenses that allow satellites to talk directly to unmodified smartphones.
Securing the customer: A “long and proven track record” with Apple, which uses Globalstar for its Emergency SOS features.
Ben Thompson notes that this deal might be less about Amazon becoming a phone company and more about Apple vs. Musk. In his view, Apple likely "made this deal happen" to avoid being forced to negotiate with SpaceX and to maintain control over its ecosystem. For Amazon, it's a win-win: they deepen their AWS relationship with Apple while gaining the infrastructure to track their own global logistics and drone fleets.
Critics point out that Globalstar’s 24 satellites are aging “bent-pipe” relays—technology that simply bounces a signal without processing it. But for Amazon, the satellites are disposable; the regulatory rights are eternal.
Aparna Venkatesan, astronomy professor at the University of San Francisco, explained to Wired:
“It’s tapping into this package of already preapproved global spectrum rights [...] it’s going to get connected to this huge iPhone market. So I think that’s a very compelling business package.”
Bottom line: Starlink is building the fastest, largest network. Amazon is building the most integrated ecosystem. By controlling the spectrum that powers the iPhone's safety features, Amazon ensures that even if it loses the numbers game in space, it remains an essential service on the ground.
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Save 15% with this link.
Disclosure: I own AMZN, META, and NFLX in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-04-15 21:52:59
Welcome to the Premium edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
A new earnings season is here with the big banks kicking us off.
Later this week, we’ll have a look at Netflix and the picks and shovels of the AI era, TSMC and ASML.
The banking sector’s first report card of 2026 arrived amidst a world on edge. The soft landing narrative was abruptly challenged by the outbreak of the Iran war, a conflict that has sent shockwaves through energy markets.
Against this volatile backdrop, the results were surprisingly robust. But the numbers hidden beneath the surface tell a story of a widening divide. While the ultra-wealthy are seeing their portfolios balloon from record equity prices, the gas pump tax is beginning to bite at the lower end.
Let’s break down the results.
Today at a glance:
JPMorganChase: Trading Powerhouse
Bank of America: Equities Take the Crown
Wells Fargo: Expansion Squeeze
Citigroup: Turnaround Hits High Gear
As a reminder, banks make money through two main revenue streams:
💵 Net Interest Income (NII): The difference between interest earned on loans (like mortgages) and interest paid to depositors (like savings accounts). It’s the primary source of income for many banks and depends on interest rates.
👔 Noninterest Income: The revenue from services unrelated to interest. It includes fees (like ATM charges), advisory services, and trading revenue. Banks relying more on noninterest income are less affected by interest rate changes.
Here are the significant developments shaping Q1 FY26:
🚢 Strait of Hormuz shockwave: Geopolitics is no longer a distant concern. Wells Fargo reported that gasoline spending has surged nearly 30% since the conflict began. While Jamie Dimon notes the economy remains resilient for now, there is a growing consensus that it takes several months for high fuel costs to drain excess savings and force a pullback in discretionary spending.
🎰 Traders feast on volatility: Market chaos is a goldmine for the desks. JPMorgan (+20%) and Citigroup (+19%) delivered historic trading results as tensions in the Middle East and AI-driven tech swings forced a massive rebalancing of global portfolios. For the big banks, volatility is proving to be a highly profitable hedge against slowing loan growth.
🤖 Private credit boogeyman: The big banks disclosed over $100 billion in exposure to private credit. While Jamie Dimon insists the banks are “not particularly worried” because they sit behind a large loss cushion, investors are hyper-focused on how these loans—often tied to software firms—will hold up as AI disrupts traditional business models.
🏦 NII peak is here: The era of easy interest income is fading. JPMorgan and Wells Fargo both signaled that Net Interest Income (NII) is reaching a ceiling. As the ‘higher-for-longer’ environment finally begins to normalize and deposit costs remain sticky, the banks are shifting their focus from lending margins to fee-based businesses such as Wealth Management and Equities.
🏛️ Basel III Endgame U-Turn: In a surprising regulatory win for the banks, the Fed issued a revamped proposal that could actually decrease capital requirements by nearly 5% for the largest firms. This pivot suggests Washington is prioritizing market liquidity and lending capacity.
📉 K-Shaped consumer: The resilience is real, but it’s uneven. JPMorgan saw credit card spending rise 9%, yet Wells Fargo noted “rising stress” for less affluent customers. We are seeing a divergence: the high-end consumer is buoyed by asset growth (stocks/real estate), while small businesses are tightening their belts, with new lending at JPM dropping 10%.
🔑 Takeaway: The big banks are thriving on market volatility and high-end wealth fees, but they are sounding the alarm on sticky energy inflation that could erode consumer savings by the second half of the year.
Let’s visualize them one by one and highlight the key points.
Net revenue grew 10% Y/Y to $49.8 billion ($1.6 billion beat):
Net interest income (NII): $25.4 billion (+9% Y/Y).
Noninterest income: $24.5 billion (+11% Y/Y).
Net income: $16.5 billion (+13% Y/Y).
Adjusted EPS: $5.94 ($0.48 beat).
Key developments:
📈 Trading breaks records: JPMorgan’s traders delivered their highest-ever quarterly revenue, pulling in $11.6 billion (+20% Y/Y). The performance was fueled by record-breaking results in equities and a 21% surge in Fixed Income. Volatility from the Middle East conflict and AI-driven tech swings created a perfect environment for the trading desks to capture volume.
📉 NII outlook trimmed: Despite the earnings beat, the stock saw pressure after management lowered full-year Net Interest Income guidance to $103 billion (down from $104.5 billion). While Q1 NII was strong at $25.4 billion, CFO Jeremy Barnum signaled that tailwinds are fading, suggesting future quarters may flatten as the interest rate environment shifts.
💰 Investment Banking rebound: After a disappointing end to 2025, Investment Banking fees came roaring back, surging 28% Y/Y to $2.9 billion. The standout was M&A advisory, which saw a massive 82% jump to $1.3 billion. This broad-based recovery helped offset a minor 7% dip in debt underwriting and silenced concerns about a prolonged slump in dealmaking.
🛡️ Credit reserves stabilize: The massive reserve from the Apple Card integration has moved into the rearview mirror. The bank added just $191 million to credit reserves this quarter—significantly lower than the $3 billion analysts feared—thanks to a release in consumer reserves and stable net charge-offs.
⚖️ Regulatory friction: Jamie Dimon used the earnings call to blast proposed ‘Basel III Endgame’ rules, which could force the bank to hold an additional $20 billion in capital. Dimon argued these requirements lack a clear purpose and could hinder the bank’s ability to deploy capital effectively.
🔑 Takeaways: A historic performance from the Wall Street desks drove a strong beat. The integration issues in late 2025 have been resolved. While the slight trim to NII guidance was underwhelming, the resurgence in Investment Banking and the record-setting trading floor suggest JPM is successfully pivoting its profit engines.
Key quote:
CEO Jamie Dimon: “The US economy remained resilient in the quarter, with consumers still earning and spending and businesses still healthy. At the same time, there is an increasingly complex set of risks—such as geopolitical tensions and wars, energy price volatility, and large global fiscal deficits.”
2026-04-11 22:01:06
Welcome to the Saturday PRO edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
📊 Monthly reports: 200+ companies visualized.
📩 Tuesday articles: Exclusive deep dives and insights.
📚 Access to our archive: Hundreds of business breakdowns.
📩 Saturday PRO reports: Timely insights on the latest earnings.
Today at a glance:
🛩️ Delta: Fuel Shock Litmus Test
🍺 Constellation Brands: Sober Outlook
🌿 Tilray: Global Pivot
Delta kicked off FY26 by proving its premium-heavy business model can be a shield against geopolitical chaos. Despite an unprecedented spike in jet fuel prices driven by the conflict in the Middle East, the airline easily cleared Wall Street’s expectations.
Q1 was a battle between record-high demand and record-high fuel bills. Delta pivoted quickly to fare recaptures and capacity cuts.
Revenue rose 13% Y/Y to $15.9 billion ($1.0 billion beat). Remuneration from the American Express partnership grew in the double digits, while the Maintenance, Repair, and Overhaul (MRO) segment more than doubled its revenue to $380 million. They are both part of “Other” revenue.
Adjusted EPS landed at $0.64, surging 40% Y/Y and comfortably beating the $0.57 consensus. That was despite fuel expenses rising by $330 million in Q1 alone, with jet fuel prices jumping 10% in March.
Delta's fuel costs ended the quarter at a two-year high of $2.80 per gallon, a sharp move that added $330 million in unbudgeted expenses in March alone. This visual confirms why management is bracing for this trend to accelerate toward $4.30 per gallon in the June quarter.
Management’s outlook for the June quarter was a mix of aggressive margin protection and a wait-and-see approach to the full year:
$2 Billion Fuel Headwind: Delta expects its fuel bill to be $2 billion higher in Q2. To combat this, the airline is slashing capacity by 3.5%, specifically targeting less profitable red-eye and midweek flights.
Price Hikes: Delta is guiding for low-teens revenue growth on flat capacity. It intends to pass higher costs directly to consumers through fare hikes and increased bag fees.
FY26 Outlook Reaffirmed: CEO Ed Bastian refused to walk back his $6.50–$7.50 EPS guidance for the full year, though he noted a formal update would depend on the fuel environment stabilizing over the next few months.
Bastian’s core thesis is that high fuel prices act as a catalyst for change, separating high-margin winners from weaker competitors who cannot pass on costs. While the Pakistan-brokered ceasefire and the reopening of the Strait of Hormuz provided a relief rally for the stock, Delta is clearly bracing for a challenging fuel environment by leaning into its affluent customer base.
2026-04-10 20:02:48
Welcome to the Free edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
Earlier this week, the AI race leaderboard just saw a historic—and controversial—flip.
Anthropic announced its annual revenue run rate (ARR) has topped $30 billion. It was just a few days after OpenAI disclosed its ARR was roughly $24 billion. These numbers can be a bit confusing, but they are essentially the revenue from the past month multiplied by 12.
Founded by a team of former OpenAI employees, the safety-first AI lab has officially leapfrogged its competitor. While OpenAI is busy navigating C-suite volatility (more on that below), Anthropic has been catching up at breakneck speed.
Before we declare a new king of AI, we have to look at the accounting. Anthropic said the bigger number, but the two companies count their chips differently:
Anthropic’s gross method: They record the full amount a customer pays, then count the cloud provider’s cut (AWS/Azure/GCP) as an expense later.
OpenAI’s net method: They typically record only what they actually receive after Azure takes its share.
If we compared apples to apples, the gap would likely vanish. However, in the game of venture scale and market perception, Anthropic clearly has momentum in its favor.
The launch of its latest model, Mythos, doubles down on this enterprise-first strategy. The model, hilariously dubbed too powerful to be publicly released, is restricted to vetted partners at a 5x price premium ($125 per million output tokens). It’s a specialized tool for automated cybersecurity. In testing, Mythos autonomously uncovered thousands of previously unknown security flaws across every major operating system, including bugs that had survived decades of human review.
Anthropic now has over 1,000 enterprise customers spending $1M+ annually, and just secured a massive 3.5 gigawatt compute partnership with Google and Broadcom.
Today at a glance:
🏭 Intel: Team Blue Joins Musk’s Terafab
🤖 OpenAI: One Battle After Another
🥑 Meta: The Avocado Moment
Two weeks ago, we looked at Elon Musk’s audacious plan to solve his own chip supply constraints by building Terafab—a 100-million-square-foot vertical integration play in Austin. Our takeaway then was that while the vision was grand, the balance sheet was the ultimate bottleneck.
This week, the math changed. Intel has officially joined the Terafab joint venture.
After a high-profile handshake between Musk and Intel CEO Lip-Bu Tan at Intel’s campus last weekend, the chip giant is now a cornerstone partner alongside Tesla, SpaceX, and xAI. It’s a full-stack collaboration to restructure how silicon is built.
When we first discussed Terafab, the skepticism focused on how Musk could replicate decades of specialized foundry expertise from scratch. Intel’s entry provides two things Terafab was missing: 18A Node IP and Advanced Packaging (EMIB-T).
Intel is bringing its System Foundry approach to Austin. By integrating Intel’s packaging technology under the Terafab roof, Musk can achieve that “recursive design loop” he promised—linking logic, memory, and specialized space-hardened chips in a single, high-efficiency flow.
For Intel, this is the ultimate win for its foundry turnaround. Being the primary partner for Tesla’s Optimus and SpaceX validates Intel as the only US firm capable of leading-edge logic at this scale.
The new structure places Intel as the foundational brain, SpaceX as the bank, and Tesla/xAI as the primary customers.
This partnership moves Terafab from a speculative moonshot to a serious sovereignty play. By anchoring the project with Intel’s 18A process, Musk is hedging against capacity constraints at TSMC and Samsung while keeping the entire supply chain within US borders.
Bottom Line: With Intel bringing its manufacturing muscle to the table, the Terafab is becoming more concrete. The question for investors shifts from “Can they build it?” to “Who owns the margins when the silicon starts rolling off the line?”
Between a brutal New Yorker expose and a sudden leadership vacuum, OpenAI is making moves that look more like brand defense than technological innovation.
OpenAI just acquired TBPN (Technology Business Programming Network), a niche tech talk show, for a price tag reportedly in the “low hundreds of millions.”
In context: In 2024, Spotify renewed its deal with Joe Rogan for $250 million to reach 20M+ people globally. OpenAI just spent a similar order of magnitude on a channel with roughly ~70,000 viewers per episode.
Wait, but why? According to Sam Altman, it’s a narrative play. By owning a builder-friendly media channel, OpenAI is attempting to bypass traditional journalism. They are buying a space to speak directly to the tech elite, free from the performative attacks of mainstream news.
Not so independent: The two hosts, John Coogan and Jordi Hays, will report to Chris Lehane, OpenAI’s chief political operative. They also now have an obvious financial stake in OpenAI’s success, even if the exact terms of the deal were not disclosed. OpenAI says the show will remain editorially independent. But once a media channel is owned by the company it covers, skepticism comes with the territory.
The timing of the TBPN deal follows a devastating 16,000-word New Yorker investigation this week that paints a grim picture of OpenAI’s internal culture.
Trust Gap: The report cites memos from former leaders (including Anthropic’s Dario Amodei) alleging a pattern of manipulation and deception by Sam Altman.
Safety claims vs. reality: While OpenAI publicly claims to prioritize AI safety, the report alleges that only 1%-2% of the company’s compute has gone toward safety research, often using older hardware.
Winning at all costs: Most startling, the report says OpenAI discussed a “prisoners’ dilemma” strategy that would pit world powers against one another to secure the hundreds of billions needed for its infrastructure buildout.
While OpenAI is buying media companies, its executive bench is suddenly looking thinner. Several pillars of its leadership team came under pressure.
Fidji Simo (AGI Deployment Lead): Taking medical leave.
Kate Rouch (CMO): Stepping down to focus on cancer recovery.
Brad Lightcap (COO): Moved to “Special Projects” to help oversee a new private-equity joint venture.
Sarah Friar (CFO): The Information reports a growing rift with Altman over IPO timing. Friar has reportedly warned that a 2026 IPO may be too early given OpenAI’s projected cash burn, which could exceed $200 billion before the company reaches steady cash flow.
Bottom Line: When a company’s executive bench is thinning and its ethics face fresh scrutiny, optics management is starting to look as important as product development.
After a year of playing catch-up and a series of high-profile Llama disappointments, Meta just threw its hat back in the ring. On Wednesday, the company debuted Muse Spark, the first model from Zuck’s new Meta Superintelligence Labs (MSL).
The market loved it as shares jumped 8%.
For the first time, Zuck is walking away from his open source mantra.
Closed-Source Pivot: Muse Spark (internally known as Avocado) is a closed-source model. Its code and weights are staying behind Meta’s firewall. It will be available via Meta AI (both the app and the browser).
The Wang Era Begins: Muse Spark is the first major model tied to Alexandr Wang’s new superintelligence effort after Meta’s $14.3 billion Scale AI deal. Wang is a known proponent of closed models.
Monetization: Meta is inching closer to the commercial AI playbook with private API access, even if paid pricing hasn’t been announced yet. It would be a major development because virtually all of Meta’s revenue still comes from advertising.
Bloomberg reported that Muse Spark was trained using several third-party open-source models, including Alibaba’s Qwen. If accurate, that could raise fresh questions about model provenance and political optics in Washington.
The Good: Muse Spark looks strong in science, math, health, and visual understanding. Meta says the upgraded assistant supports Instant and Thinking modes, with a more advanced Contemplating mode rolling out to boost reasoning through multiple subagents.
The Bad: It still trails frontier leaders in coding. Zuck himself has been managing expectations, calling this a “data point on our trajectory” rather than a final frontier.
Meta is leaning into its greatest competitive advantage: distribution. The company is embedding Muse Spark into apps that reach 3.5 billion users. The model seems to target consumers over software engineers. Could Meta capture a meaningful share of AI queries simply by owning the apps already on everyone’s phones?
This puts OpenAI in a precarious strategic position. With Anthropic increasingly dominant in the high-margin enterprise market and Meta/Google owning the digital advertising world, OpenAI’s business looks stuck between a rock and a hard place.
Bottom Line: Meta is no longer the benevolent provider of free models. By closing the source and hiring the most expensive researchers in the world, Zuck has turned Meta into a direct commercial rival to the leading AI labs. For now, the market is valuing Meta primarily on its existing advertising business. That may be proven wrong if the company can start driving meaningful revenue from its proprietary models.
That's it for today.
Happy investing!
Thanks to Fiscal.ai for being our official data partner. Create your own charts and pull key metrics from 50,000+ companies directly on Fiscal.ai. Save 15% with this link.
Disclosure: I own AAPL, GOOG, META, NVDA, and TSLA in App Economy Portfolio. I share my ratings (BUY, SELL, or HOLD) with App Economy Portfolio members.
Author's Note (Bertrand here 👋🏼): The views and opinions expressed in this newsletter are solely my own and should not be considered financial advice or any other organization's views.
2026-04-07 20:04:16
Welcome to the Premium edition of How They Make Money.
Over 300,000 subscribers turn to us for business and investment insights.
In case you missed it:
While AI labs like OpenAI and Anthropic are raising capital at eye-watering 30x to 40x forward revenue multiples, the public markets are telling a different story.
The data reveals two extremes:
AI ramp cycle discount: NVIDIA grew revenue by more than 70% last quarter, yet now trades at roughly 21x forward earnings — trailing the S&P 500 average for the first time since 2013. Similarly, Amazon now trades meaningfully below its historical valuation range as investors focus on the size of its spending bill.
Status quo premium: Conversely, Walmart has crossed a $1 trillion market cap, trading at a staggering 43x forward earnings despite modest 4% growth. The market is awarding a higher multiple to a brick-and-mortar retailer than to the world’s leading cloud infrastructure provider.
This is the irony of the AI scare trade. Investors are no longer viewing heavy R&D and CapEx as a moat-expanding advantage. Instead, they are treating ambition as a liability, rewarding low-drama retailers and staples with tech-like multiples simply because their earnings are easier to model.
Today at a glance:
The Absurdity Index: Flight to safety versus AI discount.
The Macro Catalyst: Why the Iran conflict triggered a duration reset.
The Efficiency Trap: Solving the Jevons Paradox of AI.
Software’s Big Reset: The ‘terminal value’ panic in SaaS.
The Meta Irony: Why the market is ignoring the most proven AI ROI.
The 3-Step Filter: Separating ‘deserved discounts’ from ‘generational moats.’
In a rational market, you pay a premium for growth. In the 2026 AI scare trade, that logic has been inverted. Investors are currently paying up to avoid companies ramping their AI infrastructure spending.
We are witnessing a duration reset. The market has stopped asking “How much can this grow?” and started asking “How easily can I model next quarter?” This has pushed the valuations of boring staples to levels historically reserved for SaaS darlings.
For the first time since 2013, NVIDIA is trading at a discount to the S&P 500 average.
Think about the irony: The company providing the picks and shovels for the AI revolution is being valued more conservatively than the average American corporation.
Look closely at the chart: Apple now trades at a 30x multiple, while NVIDIA sits at 21x. Apple—a company that just turned 50 and is currently grappling with stagnant iPhone cycles and a delayed AI strategy—is being rewarded with a certainty premium because it is a proven cash machine. The market is effectively saying it values Apple's past more than NVIDIA’s future.
This distortion isn’t because Walmart’s fundamental moat suddenly expanded threefold. It’s because its earnings path is cleaner.
When you buy Walmart at 43x, you are buying psychological relief. You are paying a premium to avoid worrying about Anthropic blog posts, Blackwell chip yields, power grid constraints, or geopolitical tensions in Taiwan or Iran.
The great AI rotation exists because the market is treating massive infrastructure spending as a leak in the boat rather than a motor on the back. By rewarding predictability and punishing reinvestment, the market is signaling a risk-off sentiment.
The irony is that by overpaying for the flavor of the month, investors may be locking themselves into subpar long-term returns.